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full $474,903 constitutes taxable capital gain income to Khalaf.
Petitioners contend that Khalaf’s cost basis in his shares of
stock in Al Zuni was at least $486,000.
At trial, Khalaf and Peck testified that Al Zuni was
incorporated in 1976 with a capital contribution of property of
$360,000 and that in 1983 Khalaf made an additional cash
contribution to Al Zuni of $126,000. Khalaf thus contends that
his total cost basis in his stock in Al Zuni was $486,000, an
amount that fully offsets the $474,903 capital gain income that
respondent charges to Khalaf.
The trial record is not complete with regard to Khalaf’s
capital investment in Al Zuni. No stock record book or canceled
checks were offered into evidence that provide verification of
Khalaf’s basis in his shares of stock in Al Zuni. In evidence,
however, are copies of Al Zuni’s corporate Federal income tax
returns for 1983 and later years in which Khalaf’s capital
investment in his shares of stock in Al Zuni is consistently
reflected as $486,000.
Based on the limited evidence before us on this issue and in
light of Khalaf’s testimony and the invested capital reflected on
Al Zuni’s corporate Federal income tax returns, we conclude that
on September 15, 1992, Khalaf’s cost basis in his shares of stock
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